HomeMy WebLinkAboutG-1.1. Semi Annual Report Azusa L&W Energy PortfolioINFORMATIONAL ITEM G-1
TO: HONORABLE CHAIRPERSON AND MEMBERS OF THE AZUSA UTILITY BOARD
FROM: TIKAN SINGH, GENERAL MANAGER
DATE: JULY 28, 2025
SUBJECT: SEMI-ANNUAL REPORT ON AZUSA LIGHT & WATER’S ENERGY PORTFOLIO
BACKGROUND:
The Utility Board adopted an updated Energy Risk Management Policy in February 2024. The Policy
provides for reporting to the Utility Board (UB) on a semi-annual basis on energy-related matters,
including risk, hedging, cost projections, market changes, and certainty on projections.
RECOMMENDATION:
Staff recommends the Utility Board take the following action:
1.Receive and file the Semi-Annual Report on Azusa Light and Water’s Energy Portfolio.
ANALYSIS:
The updated Azusa Light & Water (ALW) Energy Risk Management Policy (Policy) set certain
parameters to lessen risk and/or market exposure as much as possible. The Policy also established the
creation of a Risk Management Committee (RMC). The RMC is comprised of the General Manager,
City Manager, Assistant General Manager – Resource Management, Administrative and Finance Manager
serving as Risk Manager, as well as legal counsel. Since the adoption of the Policy, the RMC has been
meeting regularly to discuss current portfolio statuses and hedges and recommend future risk tolerances.
The following provides further details.
Cost Projections/Market Changes
The cost of 2025 regional power in the futures market very slightly softened compared to the last
November 2024 report. As an example, December 2025 So-Cal power is running $2/MWh lower. Please
note the illustration below showing forward pricing reported last November and the forward outlook from
July 2025 through the end of 2026.
Approved
Utility Board
07/28/2025
Semi Annual Report
July 28, 2025
Page 2 of 6
The 2026 market has already accounted for installed and expected new generation. There are many market
uncertainties post-2026 to be mentioned in the latter part of this report. The clearer predictions include a
boom in data center demand and an aging fossil-fueled infrastructure. Initial 2030-on supply-demand
forecasts predict nationwide power supply shortages as this new data center demand will outpace new
proposed generation.
On the capacity front, the cost of capacity in California has remained steady. The following is a snapshot
of various offers for future periods.
34
54
42
17
9
27
67
50
35
44
71
53
21
0
10
20
30
40
50
60
70
80
So Cal Forward Energy Prices ($/MWh) as of 11/5
11/24 12/24 1/25 2/25 3/25 4/25 5/25 6/25 7/25 8/25 9/25 10/25 11/25 12/25 1/26 2/26 3/26
$43
$57
$47
$38
$45
$66 $66
$49
$26
$16 $16
$32
$57
$68
$57
$48
$52
$68
$-
$10
$20
$30
$40
$50
$60
$70
$80
Fwd So Cal Futures Indicative Market as of 7/2025 ($/MWh)
Semi Annual Report
July 28, 2025
Page 3 of 6
ALW’s Resource Update
Since the November 2024 Board update, ALW’s resources have generally performed as expected. The
wind resources performed exceptionally well. There are a couple of minor outages to report. One 0.5
MW turbine from the Garnet Wind site has been down due to a broken gearbox. The turbine is awaiting
a gearbox replacement expected as soon as wind conditions permit. With a turbine down, the Garnet site
has a current maximum capacity of 6 MW out of its nominal 6.5 MW nameplate capacity. Another short,
forced outage occurred in late June affecting the Lodi plant. A tube leak was found, was immediately
located and fixed. The unit was placed back in operation July 2.
As of the end of June, 103,195 MWh have been generated from the renewable fleet. For 2025, utilities
under the Renewable Portfolio Standard must meet 47% of their retail load from renewable generation.
ALW will meet this target from its fleet of 5 solar projects, 2 wind projects, and its San Dimas small hydro
project that will be generating throughout the summer.
Staff constantly reviews its hedging requirements based on its expected loads as may be impacted by
normal or otherwise weather patterns. Please note the current hedge plan through the end of 2026:
Period $/Kw-mo
Oct-25 3.00$
Nov-25 2.00$
Q3 2026 30.00$
2028 9.25$
Capacity Markets
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20%
40%
60%
80%
100%
120%
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18 Month Energy Hedge Planning
Act. Hedge Min. Hedge
Semi Annual Report
July 28, 2025
Page 4 of 6
ALW’s capacity supply, as shown below, projects that most months are meeting the 115% reserve
requirement. Staff continues to procure capacity as needed. Please note the projection below assumes the
grid operator and staff will mutually agree to continue keeping the Mesa project’s capacity value intact.
The grid operator annually assesses capacity values for all power plants delivering to its grid and publishes
a report in the latter part of each summer. Staff will review and ensure it receives the highest capacity
values for its eligible generation fleet later this summer.
-Potential Stress Events
Staff constantly observes evolving market conditions. This summer has already been steadily warm yet
has not seen any close calls due to a lack of supply. Key risks to communicate include unforeseen extreme
weather swings, plant and/or transmission outages as well as fires. There have been numerous fires in the
region, however, most of them have been contained in a timely manner.
From the last report, it was mentioned staff would monitor any legislative risk with the new presidency
and any state impacts. Staff has the following to report based on recent legislative developments. The
One Big Beautiful Bill Act (OBBB), signed on July 4, 2025, impacts the energy sector in significant ways.
First, it radically accelerates the sunsetting of energy tax credits, the exact credits that incentivize
developers to build renewable projects. Under the OBBB, wind and solar projects not completed by the
end of 2027 will LOSE all credits. For those developers that have started construction or will be starting
soon, there is a compressed timeline.
0%
20%
40%
60%
80%
100%
120%
140%
160%
Capacity Supply July 2025 -Dec 2026 (%)
Capacity Supply 115% Capacity Target
Semi Annual Report
July 28, 2025
Page 5 of 6
Under the OBBB, all wind and solar projects that were envisioned to be completed after 2027 are
impacted. ALW is affected by this new regulation with its participation in the Bonanza Solar/Energy
Storage project as the construction start date was planned after 2027. ALW staff and Southern California
Public Power Agency (SCPPA) staff are in communication to begin the discussion of cost impacts. The
governor and California Energy Commission have already requested data from impacted utilities so the
magnitude of the issue can be quantified. Many SCPPA projects as well as individual projects from all
California utilities will undergo transitions. It is too soon to foresee exactly the specific impacts; however,
it is expected that parties will have to go back and renegotiate the pricing terms of these projects or perhaps
mutually terminate them altogether if no major development costs have been spent.
It is unknown if the State will relax any renewable targets just yet. For now, the removal of any tax credits
will result in estimated higher costs for renewable projects in the realm of 30%-50%. Also, the resurgence
of fossil-fueled plants is in play. It remains to be seen how the State digests this new momentum and how
willing it is to stay the course with clean energy. The affordability of power will be a main topic of
discussion among utilities, the CEC, and the governor’s office, as developers also have to maintain a
steady supply of domestically sourced raw materials to avoid the impact of tariffs.
Staff will report back on the specific impacts of the Bonanza Project as talks very likely will be had among
the participants, SCPPA, and the developer.
-Summary
From an energy supply perspective, the ALW portfolio continues to be healthy. Supplemental energy
purchases will fill select periods of lower renewable output. Staff will continue diligently procuring short-
term capacity as it awaits the outcome of the Bonanza Solar/Battery Project. Regarding its renewable
progress, ALW staff is in good shape for a few years. In the next semi-annual report, staff will report any
changes in projections that differ from this report.
FISCAL IMPACT:
This item has no fiscal impact.
Prepared by:
Richard Torres
Assistant General Manager – Resource Management
Semi Annual Report
July 28, 2025
Page 6 of 6
Reviewed and Approved: Reviewed and Approved:
Danny Smith Tikan Singh
Admin & Finance Manager General Manager
Reviewed and Approved:
Sergio Gonzalez
City Manager